The Striking Price

What Price is Right?

The tricky art of valuing volatility, and options

If it's any consolation, anyone wondering if they're overpaying to buy options (or undercharging to sell them) this unsettling summer is in extraordinarily good company. Even Myron Scholes says pricing options "is tougher in this uncertain market," and the man has won a Nobel prize for his theory on, well, pricing options.

The question of option valuation is particularly apt now. As companies from Coca Cola to Wal-Mart prepare to account for stock options as an expense, how their options are valued will have a...